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A new report from crypto data startup Messari estimates that the true
market capitalization and circulating supply of the digital asset XRP is
markedly less than what data sources currently present.
As depicted on data providers like CoinMarketCap as well as Ripple – the
distributed ledger tech company closely linked to the digital asset –
XRP’s circulating supply is pegged at roughly 41 billion tokens. But in
its report, Messari posits that of that figure, 19.2 billion XRP “may be
illiquid or subject to significant selling restrictions” tied to daily
trading volume, including “at least 6.7 billion XRP” held by Ripple
co-founder Jed McCaleb that are subject to an agreement between him and
Ripple.

In addition, Messari said that it believes that the circulation figure
includes 5.9 billion XRP pledged by Ripple co-founder to a nonprofit
entity called RippleWorks, an amount that it contended hasn’t been
delivered. As well, Messari identified 2.5 billion XRP held by
RippleWorks that are also subject to daily selling restrictions.

Further, the report also estimates that as much as 4.1 billion XRP sold
via XRP II, Ripple’s money-services business, is also subject to selling
restrictions. But Messari notes that “it is impossible to track the
magnitude of this illiquidity without direct disclosures from Ripple, so
we use a reasonable estimate.”

All told, these factors have led to the market cap of XRP being “likely
overstated” by more than $6 billion, according to Messari’s reasoning.

Following the publication of this report, a spokesperson for Ripple disputed Messari’s findings, telling CoinDesk:

“Not only does this report contain several inaccurate assumptions
around lockups and selling restrictions, the entire report is based on
an incorrect calculation of market cap. While decentralized digital
assets like XRP are different from traditional equities, the term
‘market cap’ is always a very simple calculation: current price X total
number of the asset = market capitalization. That puts XRP’s current
market cap at approximately $31 billion. We believe that any other
calculation of market capitalization for XRP is not a clear
representation of the truth.”

In its report, Messari estimated that the figure could ultimately be higher, explaining:

“In reality, this estimate may prove to be conservative, as they
belie XRP trading volumes which have consistently fallen well below that
of EOS and Litecoin, two cryptoassets whose current referenced market
caps are a mere 17% and 15% of XRP’s, respectively. In addition, we
believe the actual amount of ‘restricted’ XRP in distributions to
investors, banking partners, and team member may be significantly higher
than our initial estimates reflect.”

The report notes that it sought input from Ripple and RippleWorks before
the report’s publication but hadn’t heard from the company, which
Messari contended results in questions about how the restrictions work
in practice.

“Ripple has not shared the methodology or reference exchange data it
uses to calculate trading volume for XRP, a critical data point that
drives selling restrictions. More than 99% of XRP trading volume appears
to come from overseas exchanges, many of which have been suspected of
wash trading,” the report states.

On Thursday, Ripple released its Q4 report, noting that average daily
XRP volume was $585.7 million. The firm sold $88.88 million
programatically – an increase compared to its third-quarter figure of
$65.27 million – and $40.15 million in “institutional direct sales,”
representing a decrease from Q3’s $98.06 million.